NEW YORK, Nov 16 (Reuters) - Virtus Investment Advisers, a top mutual fund manager, will pay $16.5 million to settle charges it used false performance claims to boost an investment strategy using exchange-traded funds, the U.S. Securities and Exchange Commission said on Monday.

The SEC penalty came after a several-year investigation by the regulatory agency into performance claims behind the popular AlphaSector strategy, which Hartford, Connecticut-based Virtus packaged as a mutual fund.

F-Squared Investments, which managed the strategy, paid $35 million last year to settle charges and later filed for bankruptcy.

The firm had been a top specialist in managing portfolios of ETFs for retail financial advisers and institutions.

"Virtus accepted F-Squared's historical performance misrepresentations at face value and ignored red flags that called these statements into question," Andrew Ceresney, director of the SEC enforcement division, said in a statement.

Virtus Investment Partners Inc, which oversees the mutual funds, did not admit to or deny the SEC's findings. (Reporting by Trevor Hunnicutt in New York)